lower income folks. 50% have incomes over $22,500 a year and many of them are struggling to afford coverage as well as dental work. is strengthening the medicare savings programs were subsidy programs particularly if we are looking at the sgr into doing that simultaneously? >> that's what i wanted to ask about. we would like to permanently repeal it. the program that pays the part d. premiums is set to expire at the end of the year. so don't you think of the s. time we deal with sgr we ought to do with that? >> it's imperative the program continue to be dealt with with the sgr and continue to reauthorize. >> i yield back. >> i recognize the gentleman from illinois for five-minute. >> thank you mr. chairman.

sorry i had to excuse myself during the testimony. a couple points. one is i like myself and a handful of other staffers make sure that we were enrolled in our new health care plan because we couldn't get confirmation. fortunately i got confirmation that i'm finding out like everybody else i have less coverage at a higher cost. the concern is as it is exhibited by the constituents on medicare advantage we will see the same thing of her in medicare advantage and so i think that this is a timely hearing because it's like everything else in this new movement of health care. everybody is going to get less coverage and higher cost, no matter who you are or where you are in this country because of these before. i was hearing the committee went

secretary sebelius affirmed that the fact that they double counted the $500 million. you can just check the transcript and check the testimony. it took five minutes to get out of. about in the end, she said we double counted because we had a $500 billion of savings out of medicare that is going to go to obamacare and of course we were strengthening medicare by $500 billion. having that as a part of the record, how can we say that medicare has strengthened? is medicare now stronger than it has ever been? >> i don't bb of the trust fund reveals anything about the future solvency of medicare. the facts on the ground are that in recent years the gap between the premiums into payroll taxes going in is $300 billion.

>> that is a cash flow deficit. we get 10,000 beneficiaries every day and the absence of general reform that allow people to get the care that they need and deserve and abby slover cost growth it will fall under its own financial weight. >> for the secretary to affirm, $500 billion that isn't really chump change in the big picture of health care costs. i am getting comments from constituents in the district who medicare advantage folks now their benefits are being reduced. they are losing access to their preferred physicians. this is under the current system now. my question is how much worse can this get for my seniors who

opt out for medicare advantage? again if the strategy for controlling costs is a traditional one of just cutting the provider members and whether its doctors, hospitals, it will backfire. that approach without reform that gives you the prevention and coordination and the better care congress ends up having to put the money back in because you haven't solved the problem. to not put the money back and is tonight bullies i -- deny seniors care. >> to have access to dialysis and the like and i know that you have a special focus in that arena. as the network shrinks especially in rural america what happens to the options, what could happen to the options? >> i think that you heard that the cuts are not advisable in

the future. i must say with all due respect to the committee i think that it appeared he adjustments to get medicare advantage back to the fee for service which was enacted is not the issue that should be focused on. what should be focused on in my view is that we are potentially reducing the payment for acuity of the sickest patients which will ensure avoiding the sick patients. those are the ones that need coordination and population health and the access to good care and that is the issue that i would hope the committee would take a serious look at because without that, while we may or may not have shrinking networks and i think that we will because even today we see news reports of united and others canceling thousands of other doctors from the program, the real issue as a

physician and someone that cares about seniors is the sickest and most fragile patients that eat up all of the cost of healthcare are the ones that ought to be protected by having appropriate acuity adjusted payments for the physician groups that are managing it in a way that supports better outcomes for transparency all of the store managers are positive that support quality performance outcomes and pay accordingly based on managing the sickest seniors. >> thank you ranking member for having a hearing today and the us is foassist for taking the to testify. we are critical that they have low to moderate incomes and complex healthcare needs my first question is it did extend

the life of medicare by putting more money on medicare and the yes or no answer to that but it actually extended the life of medicare. >> i have no knowledge of the fact. >> i don't study the trust fund. >> i think that's -- we may have a difference of opinion but i think that's acknowledged it did extend the life of medicare with the affordable care act. mr. baker in your testimony you discussed changes to medicare advantage under the affordable care act that included policies to make the medicare advantage more efficient and reduce overpayments to bring the plans were in line with traditional medicare and enhanced plan quality can you elaborate on some of these improvements in managed care under the

affordable care act? >> making sure across the board of the plans are covering preventive services as well as the original medicare. another is the easy 5% medical loss ratios in ensurin ratio su% from every dollar. as a consumer dollar were government dollar. once again the star rating program and the out-of-pocket maximum driving has provided an important financial protection to folks within a medicare advantage plan into the store ratings have made it easier for the consumers to choose among the plans they do have many choices in the market and the problem we frequently see his folks not being able to choose among the plans that has helped. >> it actually refusing to quit taking the general medicare

because they want to bother patienttheirpatients to go in. >> what would you have to further improvement of care advantage? >> once again, we are very supportive of some of the things that have come out of medicare advantage. we want to make sure that there are meaningful choices in the plans, so really standardizing in the sense that that is appropriate and possible. we would love to have more data on the appeals to see where there might be problems in a particular plan. we would like to make sure there are better notices so this issue that we have been talking about with regards to slimming down some of the networks we do think that there could be more pinpoint in particular notices sent to consumers in the fall. many find out about this from their doctor and it would be nice if they found out about it from their plan in september when they get their annual notice of change so they can be ready in the < period.

finally beatnik sure that it continues to be a strong programming and database program for folks and by that we can help by increasing the availability of medigap policies and people can switch back and forth between the programs as necessary. hispanic we have heard of medicare advantagmedicareadvante changes in aca and medicare advantage would lead to widest breadth disruption of the market. from your perspective, has this been the case? >> we do not see widespread disruption at this point. we have seen some of the provider issues with providers leaving the networks. two things there. they have either chosen the plans that continue to have those providers and their network or have reverted to the original medicare program where the proprietors are available to them. >> you have written extensively

about medicare and the scientific studies must meet certain established standards to be accepted including the transparency and peer review and confidence levels to establish the validity. as a professional researcher i'm interested to hear your thoughts on a study which in my opinion the standards i believe there are many questions that we need to have answered before we can definitely say that the results have great meaning. would you agree that these are some of the questions we have answered before the validity of the conclusions as a result of mr. kaplan blank study? >> usually when you have a study they undergo the methods laid out. i didn't have time to do a thorough review of the study but both ie and a colleague looked at it quickly and the details that you would want to see which would ordinarily be there didn't appear in the paper.

it was a sort of finding that over one year so many people and i don't think that anyone else expects that is a possible findings of there are some real questions about the risk adjustment and the selection of the facts that are in the study. >> i'm out of time. >> mr. kaplan do you want to take a moment to offer a response? >> i appreciate the comments. thank you for the question. we did have our studies reviewed and we were surprised by the findings. that caused us to pause because we were so shocked by the data we didn't have an agenda walking into this. so we did have it reviewed by a number of organizations and medical centers to challenge what we were saying.

i understand she didn't have the time to review it to be thorough but we went through a substantial reviews and what we said in this is the one finding about mortality was the one that had the greatest concern and why we wanted to go forward in a longitudinal study as opposed to looking at it retrospectively but i wouldn't throw out all of the findings. >> we recognized mortality is the one most concerning and no one wants to publish the fact if you sign up for medicare advantage you have a hyperbola buddy of living than if you sign up for the medicare fee-for-service rate it was a finding that we found. >> it wouldn't have been accepted in the journal because the detail was unfair. i'm not saying there may not be questions but the detail wasn't in the report to know whether in fact that was legitimate or not and it wouldn't have gotten through the peer review. >> we had it reviewed by the leading academics because we wanted to get out at the market as quickly as possible.

>> we now recognize the doctor for questions. >> thank you very much. i would have to say that mathematica policy research might sound a little more highbrow than boston consulting group that if any of you know anything about the boston consultative group it is one of the most upstandin outstanding s in the country and i do know a little bit about that. in your testimony you suggested, and i'm paraphrasing a little bit, but you suggest that the president fulfilled his promise to the seniors when he said if you like your healthcare plan you can keep it. if you like your doctors you can keep her. and you said it's called medicare and suggesting implying if you have a notice from a medicare advantage plan that you have selected that you are no

longer going to be able to remain on the plan or you would have to get out of the business because of the 14 billion-dollar cut, 14% cut over ten years something like $300 billion k. it was okay because you still have medicare fee-for-service. i would suggest that it's pretty disingenuous to say that if you like your plan you can keep it because you get kicked out of medicare advantage and you can go to the medicare fee-for-service if you can find a doctor. it's clear that the medicare advantage program is under attack and that the beneficiaries are being able to feel the effect of the over $300 billion of direct and indirect costs included in the obamacare and with plan cancellation notices that said tens of thousands of the country seniors, some of the most vulnerable citizens are faced with this uncertainty that i just talked about. individuals are losing coverage

that they are happy with and the doctors with which they are comfortable. this is a tragedy. a bill that was rushed through congress without any serious debate strictly partisan vote is now impacting people's lives and their personal healthcare decision. mr. holtz-eakin would you please explain to the committee the reality of those potentially millions of people, seniors who lose coverage over the next few years especially when it comes to a reduction in the financial security and benefits? >> i think this is a very real possibility. it is one thing to mandate that the plan covers certain benefits and offers us to seniors and it's another thing to be in existence so they can take advantage of it. in the absence of a financial situation they will not have those choices were that care and

in deed they've already made that choice and will see their plans taken away from them. >> the distinguished chairman emeritus had to leave but she made thahemade the statements th us about the $14 billion but it would save. he was only presenting one side of the balance sheet. what was spent on medicare advantage whether that is a little too much is open to question. but the savings that occurred to medicare, and we the taxpayer because of the medicare advantage program that has paid the medicare and all the features of traditional medicare fee-for-service does not have.

this benefit is used by seniors and all walks of life and is prevalent for the seniors that i think that you said earlier with lower incomes. to the benefits and coverage will affect over income seniors more vertically than others. >> 75% will be experienced making less than $32,000 ballpark. >> what with the loss of the project will cost me into the population's? >> they are the most formidable and in the program that has given them not just the services into traditional fee-for-service, but additional services and in a fashion of coordinated care and quality outcomes. it is a loss in the personal choice. >> i appreciate your leadership on this issue. seniors are just now learning that the upheaval of the

healthcare system is not limited to the individual insurance market. at the purpose of the hearing today they now know that it will affect them as well. and they may lose benefits. we have heard testimony from mr. holtz-eakin and mr. kaplan. seniors may lose benefits and access to doctors and be forced to pay more for the coverage, plain and simple. and i yield back. >> the gentle lady for five minutes. >> thank you mr. chairman. welcome to the panelists this morning. from what i have read over all the medicare beneficiaries should expect and responded to the question that we are answering today. in part those improvements are made possible by the savings that came from equalizing the

reimbursement of medicare advantage and those of traditional medicare. as a family physician and an old fee-for-service, i especially think that with the reform that the outcomes from both can be equally beneficial to the beneficiaries. but i represent a territory of the u.s. virgin islands and sometimes we have unique circumstances and suffer unintended consequences. i want to ask a question on behalf of my colleagues from the puerto rico. with the revised methodology for medicare advantage plans using benchmarks based on the fee-for-service should it coordinate the timing of the medicare advantage and the fee-for-service processes? for example, cms put out the 2014 fee-for-service patients rate that changed the medicare

disproportionate share payments to hospitals but this was after the medicare advantage process of 2014 has closed in june presenting the medicare advantage plans from recovering the substantially increased. shouldn't they address this lack of internal coordination for 2014 and the harm to the plans and beneficiaries? >> clearly i'm not an expert on the ratesetting that i would say that my understanding is that medicare advantage base rates are set on the equivalency and it makes very logical sense to me that we should have all of the built in the fee-for-service cost in the base rate when the medicare advantage rates are s set.

so that would answer or direct and answer and i think it is well known that cms has not calculated the fact that it would probably be pushed out further so that they haven't given credit to the fix each year in setting the base for medicare advantage. so there are a variety of medicare advantage issues i think related to how medicare base rates are set. >> i hope that answers the question. i want to ask a question. we have heard a lot about the spikes and premiums. while some plans have increased costs, isn't it true that overall average premiums paid by the enrollees have declined since the affordable care act was enacted, and can you elaborate a little more on the premium changes.

so what factors contribute to the differences of the premiums among the plans? like me add another part to the question because of time. is it true that more than 70% of beneficiaries that are in the traditional medicare are the ones subsidizing the lower premiums for medicare advantage? >> taking the second question first it is true all beneficiaries subsidized plus the taxpayers because that covers it, too. the costs vary a lot across the country into some of them are more efficient than others and some providers are more efficient than others. premiums have difference fee-for-service payments and in some areas of the country providers are stronger and they are able to negotiate higher rates so there's less money available for extra benefits. in some areas of the country some of the plans decided to give it back in less

cost-sharing plaintiff service rather than lower the premiums so there are a lot of reasons things differ. the spikes between doctors and health plans has a history that goes back years. you're trying to get the most you can out of the system and at the best thing the policymakers can do is to set good standards to say we want to buy quality and value and to reinforce that i think they do start to do that and getting those right in figuring out across both programs, both medicare advantage and fee-for-service health to make the care better for the beneficiaries because i don't think that care is as good as it should be a matter what you're in across the plans which isn't even all their fault which has a lot to do with providers in different areas and how willing they are to get together

and how fragmented they are and especially for the beneficiaries that have chronic illness they need to providers to talk to each other and that is hard to change. the plans are dealing with that and we are dealing with that otherwise the beneficiary gets cost with the bill and the costs go up. >> the gentleman from louisiana for five minutes for question. >> i thought i was a way after. you said there should be better coordination for care. i thought that your testimony was most about what the patient experiences as opposed to what the economist might say. just point out when using the premiums would be lower relative to ten, that is because the market is offering lower-cost premiums with higher deductibles and allowing people to take

their choice and therefore they are choosing a lower-cost. it's not a function of -- that is the function. a stomach i don't believe so. we don't have good data on the other cost-sharing but i don't believe there is evidence why that has happened. >> as common sense would suggest that people are voting with their pocketbooks and vote for a lower-cost plan. doctor margolis. we had a controversy between mr. kaplan and ms. gold that says they are not sure that there is improved quality data. your testimony is excellent. my gosh, when you show the plans versus the fee-for-service and the readmission rate is so much lower and the number of hospital days, etc. that is proof of what you ar were disturbing is the coordinated care is that a fair

statement? >> thank you for that compliment, sir. >> there are things that are very evident. first of all i'm a high promoter of transparency and quality transforming. so i recognize the star program as a very good step forward. i wish there was a similar program so we would have evidence of whether medicare and fee-for-service is creating -- >> with me emphasize because i take care of the special needs patients that you mentioned the end-stage renal disease. that is where the care is the most important, yet you describe the cuts that go to the special needs program; correct? >> yes i think i said several times the greatest threat at the moment is that if we cut through the risk adjustment rescaling of the benefit of the adjusting payments based on the acuity, we

unfortunately answer to incentivize what used to be called cherry picking which is avoiding high cost patients that is a disaster for seniors and as you can see in the written testimony, if you really manage the high cost seniors with companies that care and with end-of-life care, with all of those kind of innovative programs, you can make a dramatic reduction in utilization. >> i'm going to cut you off for a second because you made your point. ms. gold and mr. baker continued to say that they have not seen the problems that we are predicting. and yet this wonderful graph in your testimony shows that we are just on the leading edge of these cut and there's compounding cuts that go through what you had in 2019 whether it is dramatic cut ultimately what the plans will receive. my character dies the graph correctly quick. >> yes sir. it's what i said --

>> i'm sorry i just have one minute 30 seconds left. you have been describing the things that can happen in these programs like special needs plans based upon 2015 that if we just extrapolate that and have mr. baker and ms. gold come back in 2019 come at that point it's fair to say that we are more likely than not to be able to say at this point we have seen a negative impact of the accumulative effect of the cuts upon the patient care. >> i believe that is an accurate statement. >> so do i. a i have a doctor gg home to lose a woman -- a woman losing her m.a. plan that is a diabetic and has had this service help her so tremendously. mr. holtz-eakin can you rest this myth that the sp10 prolonged the life of the medicare trust fund?

the doctors go out of the trustful and all of the money that goes out over the treasury has spent every dime and it's gone. >> when mr. dingell or mr. green suggested they prolong the life through the aca and you flacks say -- flatly say with your credentials you just totally dispute that. >> i testified numerous times in the year since about the fiction of government trust funds being able to pay any bills. >> i yield back. >> the chair thanks the gentleman and recognize mr. sarbanes for five minutes for questions. >> thank you mr. chairman. i appreciate the testimony of the panel.

>> he said that seniors are now learning that the aca is going to cause them harm. i don't think seniors are learning -- i think seniors are being told that by fear mongering members of the other party who don't like the sp10. and i think if seniors look carefully at their experience over the last couple of years in which the positive impact of the aca has begun to be felt, they will conclude that in fact the sp10 is benefiting now. you look at the closing of the doughnut hole and the new coverage of the certain kinds of preventive care services and

annual wellness visits where copayments have any money to end of the incentive structures that have been put in place to improve management of care and chronic conditions and a more sensible way. within the traditional medicare fee-for-service contracts as well. there is just item after item of improvements which are there because of the affordable care act which are making the medicare plan and medicare coverage more robust for the seniors. so it's just wrong to suggest that this is going to be harmful for the senior population.

this hearing is titled what beneficiaries should expect under the president's health care plan medicare advantage. and i think they could expect good things. everybody here generally is saying good things about the medicare advantage program. that isn't disputed that we have. it's whether the affordable care act is having a negative impact on what 29% of medicare beneficiaries have access to, or a positive impact. so, when mr. baker and ms. gold to say good things about the medicare advantage program, which they have, that is not somehow a contradiction on the other statements and testimony that they are offering here. i think it is very consistent.

it's just you believe in contrast to the other witnesses here that the affordable care act is actually strengthening and improving the medicare advantage act. my understanding is that the premium that was offered initially to the medicare advantage plan which is i think 114% against what the fee-for-service rate is was done because the government wanted to incentivize the market and the private health insurance industry to come in and innovate and was successful in doing that if you have the beneficiaries that are now in the plans it shows that that has happened but along the way because of the analysis we discovered that that's premium was no longer justified and was going to somethings that ended up being a

waste from the standpoint of the medicare program. i used up most of my time but can you talk about two or three things you think the affordable care act has done to improve the medicare advantage program i think all of us want to remain strong. >> one is the medical loss ratio making sure most of the money that goes to the 85% goes to medical care and closure of the doughnut hole in the preventive care services. i would also add the affordable care act does set up programs to enhance the word and aged care in the fee-for-service through the traditional program in the accountable care organizations and other mechanisms as well as strengthen medicare advantage programs in many states partnering with the federal government with regard to coordinated care for people

eligible for medicaid and medicare and that is a aca generated a program that does have promise and needs to be monitored but it looks like it has promise. >> the gentleman from virginia is recognized for questions. >> thank you mr. chairman. i want to highlight an example. my 83-year-old mother reports that her rate has ms. risen. for her to keep the policies that she has she's now paying higher rates. when secretary sebelius was here in april she claimed medicare rates were decreasing nationwide so i did a survey in my district and we found that more had their rates going up, not a huge amount as mr. baker testified at ththe biggest group or a bigger group was those who stayed about the same. a couple folks reported the rate had gone down. i'm just wondering is this the case from your prospective nationwide at the medicare

advantage rates are going down as the secretary testified earlier this year? >> we can get back but i don't think those are the facts. emphasizing there are differences across the regions and states in the united states. >> let me go to that point because one of the reasons was that i represent a very world district where it takes hours to get to the nearest hospital depending on where you are located as a result of obamacare and the cuts to medicare we lost a hospital a few months back that was to have the top three reasons why they were closing the hospital. is that more likely to be a problem where the rates are going up as opposed to the more urban areas? >> it's hard to narrow the networks because you don't have choices so they don't have the

option to do that. >> they have one choice and now they have to joy depending what part of the county you live in a good distance to get to the next where they only have one choice depending what direction they go. i do appreciate that. doctor margolis, i asked you a question, too. you were talking about the healthcare and doctor cassidy showed the truck from the testimony how the cuts are coming and you indicated earlier in the testimony that is going to limit access for some folks. is that going to be worse in the rural districts like mine? >> i think it is predictable that the cuts will affect oral areas where there's fewer choices rather than the rim areas -- urban areas where there is more competition. i can't say that i have evidence. >> comment sense would lead to

that. do you want to disagree click. >> yes because the aca has the lowest payment counties actually benefiting in some of the rural counties they will continue to have 115% of the fee-for-service so i don't think it's payment in the rural areas with managed care and getting it set up but i don't think it is the payment changes that are causing the problem. >> so you would disagree with the folks that had you would've told them they were mistaken in looking at their numbers? >> unfortunately two out of three things that th they the ls the problem the other was the war on cole, the downgrading it also responsible to this administration, but the other two things they listed were the aca and the cuts to medicare. so two out of the top three have hurt my people and i'm concerned about it and i think it is going

to affect perhaps the folks who are the elderly and also disproportionately represented in the rural areas of my district three of mr. holtz-eakin, you indicated we shouldn't be looking at the medicare advantage rates based on 2013 that we should be looking to the future. can you explain that? >> i am concerned that the current experience has been by the administration program which i will take this opportunity to say not a lot of plans are uniformly wonderful. it's a good idea to have a program to rate them. the demonstration was not a good program. it does not reward good performance and it needs reform so it actually does. ..

david then conversely say how terrible it is. what you -- you can have it both ways. in 2009 prior to the passage of the aca the rates paid to medicare advantage plans exceeding that traditional medicare but about 18%. the aca required changes to medicare advantage payment rate to better align with the costs associated with traditional medicare. these changes were estimated by the congressional budget office disabled a $135 billion over 10 years. so you can't have it both ways. every time we identified a way to save money, my colleagues on

the other side of the aisle say, this is so terrible, this is being cut, that's been cut, and then they claim that the aca is causing costs to rise. can't have it both ways. according to the 2010 medicare payment advisory commission report to the congress, the 2009 medicare spent about $14 billion more than the fisheries -- beneficiaries enrolled in medicarmedicare advantage plansn would've spent if they stayed in traditional medicare. i want to go along the lines of the question that mr. sarbanes did and asked ms. gold, how did we get to the point where we are paying so much more for private insurers through medicare advantage to provide medicaid benefits? isn't it accurate that reforms in the aca will help correct the overpayment problem in medicare advantage plan and payroll and extending medicare solvency for all beneficiaries of?

>> yes, i think it will have that effect. >> okay. let me -- i think it's also worth noting that all of the cuts to medicare that were included in the aca were also included in each of the republican budget proposals for the last three years. so under a republican proposal these cuts to medicare advantage were continued also. i want to mention the way we measure this solvency is by the medicare trustees report, and the trustees report shows post-aca solvency in medicare is extended, and i think that's important to state as well. mr. baker, i know that the past there've been concerns about medicare advantage plans cherry picking and seeking to enroll the healthiest seniors, leaving sicker beneficiaries enrolled in traditional medicare. have you seen evidence of this practice continuing our what steps the aca take to try to

stop this practice? >> once again i think a provisions in the aca that require medicare advantage plans to have similar cost-sharing or benefits that are typically used by sicker beneficiaries, by that i mean renal dialysis, nursing facility care and chemotherapy is one of the ways that those plans t have become more attractive to those sacred beneficiaries and our a way that, something the plants get used to kind of cherry-pick healthier beneficiaries over sicker beneficiaries. i think what we see anecdotally and it's born of by some of the research is that folks typically to join a medicare advantage at a relatively, the younger and healthier age. as they age and become more chronically or severely ill, they do this enroll. some dude this enroll and enroll in medicare traditional medicare with the thinking that certain treatments, certain providers are more unavailable in the

original medicare program. so we do see that pattern emerge anecdotally in our work. >> thank you, mr. baker. let me ask you this question on a different question. in new york, we have about 2100 physicians eliminate from united health medicare advantage providing network and its expected impact about 8000 of new york seniors. this was a business decision made by a private company and dcms everybody by law to say that from anything in the payment arrangements between private health insurance plans and health care provided. but i do see them as we use the authority it has to which are adequate provided networks are this all medicare advantage plans 12 ensure beneficiaries havofaccess to health care serv. so let me ask you, since they are no longer part of the specific medicare advantage network, what suggestions would you offer them. my understanding is more than 90% of physicians in america are

willing to accept new patients under the traditional medicare program. so it's moving to traditional medicare an option for them right now? >> moving back to the original medicare is an option right now are moving to another medicare advantage plan. it's orange than most of those positions and most of the hospitals or other providers that have been dropped from united or other managed care networks are in of the medicare advantage networks or are in as you said in the original medicare program. so this happens every year to some extent, and so our advice is consistent with industry to look for another plan that has your provide in it, or return to the original medicare program if that's a better program for you over all and your provider is also involved in that program. >> thank you, mr. chairman. spent now recognizes the gentleman from florida, mr. bilirakis, for five minutes. >> thank you for this very important and. i think the panel for the testimony as well.

dr. caplin -- excuse me, mr. kubba, i was reviewing a report about a medicare advantage provides better outcomes and greater savings than traditional medicare. why does the cabinet and may produce such dramatically better results of? >> i think there are probably two or maybe three things to take away the drive that. one is the alignment of of incentives. when eddy county were i think will understand that the incentives are line between those who pay for health care and those who provide the health care. without alignment things tend to be more productive in how they perform. second point is that because of that alignment what happens is there's a huge investment in preventive care. so when have the same goals and working towards the same, they will try to avoid these acute interventions to fix something that's gone dramatically wrong so they work with the member or the patient to try to manage them through. and the third point i would want to emphasize which is what dr. margolis said which is at issue

around any of these members become very sick with time, age, as well as where they are socioeconomically. when they are of the sickest portion o of the 5% the drive to 52% of the cost, that requires even greater intervention and greater coordination. and so when these ideas of coordinated care and aligning centers are very important, all assets of health care is extremely important towards the more chronically sick individuals. >> thank you very much. mr. holtz-eakin, 40% of seniors in my district had medicare advantage plans. so they love their plans, and it's very popular in my area. of course, again they like the plants. back in 2010, cbs chief actuary did a report on the impact of obamacare to medicare advantage. he wrote and i quote we estimate that in 2017 -- i know you

touched on this, but elaborate, please. we estimate that in 2017 when the m.a. provisions will be fully phased in enrollment in medicare advantage plans will be lower i about 50%, does this track with your own analysis of these cuts of? >> apps alluded. as you for today medicare advantage is a high quality program, very popular. even more popular nationwide. the senior population is rising 10,000 beneficiaries every day. one would expect that if nothing else changed you would see more enrollment, a lot more. we are going to see less. what's changed is a financial foundation, the cuts under a maple make it impossible for plans to survive and those that survive will have to change the networks and their benefits and the cost-sharing in ways that seniors will find under struggle. the net result will be less availability of medicare advantage. >> next question for you. some democrats have been pushing the accountable care organization, acos, as a model

for better care coordination and better cost savings. doesn't medicare advantage for most the same concept with a proven track record of better outcomes and costs and payment? >> m.a. has a track record and it's by and large a high quality track record as i said earlier, not every m.a. plan is created equal but it has a track record. acos our concept at this point, and unproven. there's one big difference. seniors choose their m.a. plan. seniors are assigned to the aco and they have no choice. that's a significant difference in the two concepts. >> thank you very much. i yield back. >> now recognizes the gentleman from north carolina, ms. ellmers, for five minutes. >> thank you, mr. chairman. and thank you to our panel for being here on this issue. serving the second district of north carolina, and i've been hearing since the rollout of

obamacare that my constituents who are losing their medicare advantage are very, very concerned about this issue, as you can imagine. and it's showing in north carolina that the cuts to benefits for seniors for medicare advantage are over $2000 per beneficiary. now that we are seeing this play out, the things i'm hearing from my constituents are that they are losing their access to care to their physicians, the cost is going up, and again, as you can imagine, they are very, very concerned about this issue. the mr. holtz-eakin, who again is going to be most affected by these medicare advantage cuts? which sector a population of our seniors? because i keep hearing over and over again that it's helping our chronically ill patients who

have this coverage, and this is a better plan for them. is that not who we are harming? >> again, this is a better plan for those with more chronic disease in particular that have carefully courtney lee care. typically lower income, typically more minority dissidents in m.a. that's the population that would be affected, no question about it. >> can you identify some of the actual tangible benefits? i know you talked about coordination of care and items like that the other any more specifics so that we all have a better understanding of what we are actually losing? >> i will let speed at dr. margolis -- i have another question for you, dr. margolis on the issue. you had identified quite correctly that we really need to be talking about taking care of those patients who are at the end of life, the ones who, unicode we know those are the ones that don't are we being

spent. how do you feel about the independent payment advisory board? that's going to come into play, don't you believe? >> yes, ma'am. i survey do not believe that organizations like that should make decisions about individual patient care. on the one hand. and let me just say relative to that very sensitive topic. almost nobody wants to die in a hospital -- >> thank you. >> they have support at home. and with coordinated care, integrated programs, spiritual counseling, palliative care, pain management and 24 access to caregivers, you can avoid almost everybody having that unfortunate event in the family. that's a big opportunity, and let's support special needs programs, the dually eligible, and move towards medicare advantage much more aggressively. >> i appreciate those comments. and that is exactly why i'm

concerned about this issue as you are. and ms. gold, i just had to ask a yes or no, isn't that what you identified a few months ago when you said that you thought coordination of care could be better served under another plan and under a formal care act that actually happens? >> i think there's a lot of problems with getting coordinated care spending a doesn't that do that? >> no. only some plants do. it has the potential -- >> okay [talking over each other] spin clarification. i did not say that every medicare advantage plans by dissident medicare advantage plans offer these benefits. is that yes or -- >> yes. >> thank you. just to finish out we've got about a minute and this question is actually the mr. holtz-eakin and to mr. kaplan. we've heard the bipartisan concern to, and we want to make sure we take care of our seniors. but we can say over and over

again the affordable care act is so negatively affecting our seniors with their medicare advantage plan. just coming from a completely bipartisan perspective, what can we do now moving forward? what would you like to see in medicare advantage that we can move to that we can actually make a difference? because we are going to have to make changes in medicare, yes, and i would like to know from both of you what your thoughts are on what we need to do in medicare so that we can make it better for our seniors. >> well, i think it's very important that we have a sustainable social safety net for seniors. medicare needs to be a different program in the future both financially and because of the care that seniors need that's different than when medicare was founded. medicare advantage is a great steppingstone to the future. it's not the end but it's a great steppingstone but it needs to be preserved, not wither on the vine in the next five years spent but we need financial backing.

>> the near term would be risk adjustment issue that dr. margolis mention. buries his concerns in terms of funding. >> mr. kaplan, very quickly if you can add to that. >> my simple answer is that partnership, public-private partnership has been very successful and, therefore, in my mind we should invest in debt and make it better as opposed to cutting it back. >> thank you so much. thank you to all of you, and thank you to the chairman. i went over my time, so thank you for allowing me to do so. >> the chair thanks the gentleman appeared that concludes our first round of question. we will go to one follow-up per site. and dr. burgess, we'l we will bn with five minutes of follow-up. >> dr. holtz-eakin, i want to follow up on the stuff we were talking about earlier in that first round. it appears in washington today there is a crisis in common. the president has sold the affordable care act on just a raft of false premises. you can keep your plan. false. you can keep your doctor.

faults. these are broken promises and these in fact are the opportunity cost that americans are paying for the affordable care act. there was a promise made to seniors as well, the promise was that we're going to use your medicare dollars as a piggy bank to fund the affordable care act, and in doing that we will improve medicare and seniors to keep their doctors if they liked. so do you have an opinion as to whether not this is yet another broken promise? >> it is spent and is it fixable? >> it is fixable in medicare advantage. i don't believe -- it is fixable. it is the problem but we should be on fixing medicare advantage in the ways we described earlier, and -- >> but the promises are -- just that, promises but if you like your individual policy can you can keep it. but the regulations and the funding are at odds of the promise. the promise can't be held to. >> so fixing it would be involving alteration of the

founding? >> also true. >> at the present d.c. anyway or any mechanism by which that could happen? is anything that would give you optimism that attorney-in-fact could be restored the? >> under current law it won't happen. we need to change. >> let me ask you this. i wasn't here in 1988, 1989. i don't know if you were involved space on the old, yes. [laughter] >> but there was -- dan rostenkowski, the democratic chair of the ways and means committee put together a catastrophic care program. he was very proud of it, passed the congress, bipartisan vote as i recall. they all went home satisfied with what they had done. and then something odd happened. people rejected what the law that was passed. they rejected it largely because it in a similar what is sort of moot funding around anyway that seniors thought would be deleterious to their well being.

so then do you know what happened this spring after that? >> after they got the bill and after a chase them with the umbrellas, they repealed the law. >> so there is a mechanism by which this problem could be fixed also if we follow the 1989 repeal as precedents. >> there's no question this is fixable. it requires the congress to act and the president to sign. >> it may require people with umbrellas to chase the chairman down the street. >> no comment. >> i do have to just address the issue, or ask, we have all these experts in front of us. we get reports that cost in medicare has come down. in fact, we are going to get him by the end of this week i think the congressional budget office is going to give us a projection of the proposed cut in the sustainable growth for which is likely to be less tha than what everyone when i went anticipating to commit improve the score for repeating it.

a lot of opinions as to why this cost reduction is occurring. i don't know that it's had time. certainly is playing a role but i don't know if it's entirety of it. we are here just literally 10 years past the signing of the medicare modernization act with the provision of medicare advantage and the medicare prescription drug benefit. and if we really to believe that it's better to stitch in time saves nine and is better to treat early before it is used its well-established, perhaps we are seeing some benefit from passing the medicare modernization act. to any of you have an opinion as to whether not that maybe playing a role in these lower costs? >> i don't know how much of the current slow down and health spending would contribute to prescription drug therapy but we know that others have found a

party program has reduced cost elsewhere in medicare. and that's been an important part of the change in the cost structure of medicare. it's also been important part of structure of entitlement, the party program which allowed this 10th anniversary on sunday is probably most successful on entitlements. we should try to model every reform we can as closely as possible. >> that was constructed to be more like insurance and less likely entitlement if i recall those discussions. i want to think they put on the panel. i know it's been a long morning. mr. chairman, i yield back. >> now recognize the ranking member, mr. pallone, for five minutes for a follow-up. >> thank you, mr. chairman. i just wanted to say, i'm going to ask my question to mr. dacre, but i just want to say with regard to mr. holtz-eakin's testimony with regard to acos, i just disagree. with acos and traditional

medicare, seniors have the ultimate choice. vacancy any provided they want. they are not logged in for your life you are with an m.a. plan. that's just my opinion. when i heard you say, talk to acos i just want to express my view, which is that they are not blocking. they can choose whoever they want with acos in a traditional medicare plan. nester baker, i just want to ask you about how medicare advantage can be improved. i think all of us here today agree that the medicare advantage program is a crucial alternative to traditional medicare, especially for individuals with complex health care needs. but in your opinion based on your organizations work over the years in assisting medicare beneficiaries, what recommendations do you have for how the medicare advantage program could be improved for beneficiaries? >> of course. i mean, i think the promise when it was initially put forward in the mid '90s, mid '80s in the mid '90s, the push was that it would actually say the

federal government money and provide coordinated care in additional benefits to people with medicare. i think we've talked a lot about the advantages of medicare advantage, but some of the promise hasn't been met. as we've talked some of the plans are better than others, but overall the level of cornea care does vary widely amongst plans. and so we think better monitoring and oversight by the center for medicare, medicaid services to make sure that those promises are kept. once again, better information about appeals within those programs. people call us when you have problems. consistently what we see in the medicare advantage plans are problems with access to care with utilization management or other barriers put to a variety of care. and we work with physicians and the plans to ease those barriers for people with medicare and medicare advantage. so having that information publicly available about which plan and how they are really kind of setting up maybe

unnecessary barriers would be helpful. and enable people to not only compare benefits but also to compare have those benefits are administered by particular plans and making sure people are choosing those plans that actually orphaned the promise that a lot of us have talked about with regard to a coordinate care. and i think once again, with this idea of custom tailoring stars, the stars program while it's good, needs to be better in that people really want to know when you're looking at your two cars and consumers reports from chris dudley starts overall but also on engine performance and a great performance and other kinds of performance measures. so we'll get to the place where i think we can customize those stars even more and that will also help folks choose between the program but i want to reiterate that i think the original medicare program or the traditional medicare program which we've had since 1965 is the bedrock.

it is something that people continually kno know it's thered go back to. and it has, regardless of a lot of what he said, if you look at over the last 30 years, medicare, the traditional medicare program and private insurance have done about the same job. curtailing costs, good or bad. i think there's a lot of improvement that could be made in original medicare but there's also a lot of improvement that could be made in medicare advantage as well. >> i only have a minute left, but some people including you have suggest we should consider establishing a so-called medicare part d which resulted in original medicare without beneficiaries having to pay for the overhead and office of private insurance plans. and it interesting. could you just elaborate a little on how you would envision that would be structured i would be an improvement to the current medicare structure? you have a minute. >> i think the commonwealth fund and others put together a more comprehensive proposal on what's

called part e medicare and basically what it would do is combine part a, part b, part d, prescription drugs, and medigap. supplemental in a governmental run program. this would go toe to toe with medicare advantage and with the original medicare program as it exists now. once again it's an alternative. it's something that would sit alongside and it would allow more choice for consumers, and could have a lot of the coordinated benefits and coordinated coverage that we've been talking about today. so i think it is something that would put together in one place, government run programs that has all of these components that people with medicare value and need, and could save money. >> thanks a much. thank you, mr. chairman. >> the chair thanks the gentleman. the chair thanks all the witnesses for your testimony. it's been an excellent hearing. very informational. the members may have follow-up questions. wheels but those to you invited

to please respond probably. remind members that 10 business days to submit questions for the record. so they should submit their questions by the close of business on wednesday, decembe december 18. without objection the subcommittee is adjourned. [inaudible conversations] [inaudible conversations]

>> from age eight, betty ford, knew she wanted to do something with dance. she put on place. vermont, where she studied at the school of dance.

her spiral notebooks where she cap notes. this was her organizer during this period. she carried this with her to vermont, back to grand rapids, ork where she studied with martha graham and work for the powers modeling agency, and back to grand rapids again. in it, you would find a whole host of things you would find in any organizer. dance costumes. one of her sketches of a costume for a dance routine she wanted to put on. here are choreography notes that she made for different dance routines. there is a wealth of material here that talks about her love for dance and how deeply she was involved in it, especially in her early years. >> watch a program on first lady betty ford. it saturday on c-span at

7:00 p.m. eastern. live monday, we look at first lady roselyn carter. >> for the next " washington journal," we will focus on the "farmville". -- the farm bill. we will take your questions about the affordable care act and ongoing budget negotiations and will continue the discussion orkbudget talks with a new y democrat, jefferies, and a member of the budget committee. " washington journal" is live on c-span every day at 7 a.m. eastern. >> friday at c-span, washington journal looks at the role of the national institutes of health. ernrting live at 7:30 east with director francis collins, on future projects, and the impact of sequestration.

at 8:00, allergy and infectious diseases director anthony fauci, followed by eric green, the director of the national human genome research institute. , the national cancer institute director and that 9:30, a look at the national institute of mental health with the director thomas insel. all with your calls and comments live on c-span. several live events to tell you about this morning. jack lew will be at the pew charitable trust to discuss the state of financial reform. on c-span two at 8:45. a.m., members of the house energy and -- subcommittee on energy and power will hear from the federal energy regulatory commissioners. 3, 10:30 eastern on c-span we cover a democratic steering committee meeting on

unemployment benefits that are set to expire at the end of the month. walk in, they are tables in front with a lot of pamphlets. prior to to entering the gun show. and the pamphlets are on how the government is trying to take away your rights. that, andoing obamacare is terrible. those of the guys i wanted to talk to because those are the guys with the leaflets. i said to them, is this your stuff? they said, who are you? i said, i am a researcher in doing research on these organizations, these ideas and trying to understand the guys, i am wondering -- i am studying men who like this stuff. here'said, look, what i am. i do not get it. here is my job -- i want to understand how you guys see the world. not convince me and i

will not convince you. that is off the table. what is on the table, i want to understand why you think you way you do. " downward mobility," the fears, anxieties and rage of angry white man sunday night on afterwards, part of the tv this weekend on c-span 2. -- part of book tv. jobsw president obama on and the income inequality. hosted by the center for american progress, this is a little less than our. -- an hour. [applause] good morning, good morning, everybody. thank you so much for being here. i want to thank you all for joining us. members of congress, members of the administration, mayor gray,

as well as other mayors, and i want to thank the arc for hosting us. we are thrilled to have the president to discuss one of the greatest challenges of our times -- rising inequality. we are honored to do so as cap celebrates its 10th anniversary this year. i am proud of the many bold ideas we have had over the past decade, new ideas to grow the economy from the middle out, to expand health care to all americans, and to improve our schools. still thatuder behind all of these policies is a simple idea -- expanding opportunity for all americans. we believe that no matter where you come from, we are all better off if we have the opportunity to succeed. it is at the heart of what we do every day. we have learned that expanding the middle class is the best way to grow and grow stronger. but i know that principle is critical. also because it has mattered so much in my own life. a suburb of boston,

the child of two immigrants from india. inlived in a house bedford, massachusetts, a middle-class town. when i was five, my parents got divorced and my dad left. my mother was on her own and never held a job before. she faced going back to india are going on welfare to support her two children. , we would've been stigmatized. it was unheard of to get divorced back then. she knew our life opportunities to be limited. she made that tough choice. she states. we stayed. we were on welfare. on food stamps. we received housing vouchers to pay for rent. but because of a series of fortuitous events, we were able to remain in bedford thomas and i was able to go to school. a job as atually got travel agent. by the time i was 11, i am proud

to say that she bought her own house in bedford, massachusetts. my mom is an amazing woman who sacrificed a great deal for her children. i know i'm here also because a lot of people worked hard to expand opportunity. it's hard to share my story, but i know that we live in cynical times. it is easy to dismiss the fights in washington is partisan games. but there are kids growing up today who have big dreams, despite tough circumstances. it is not a game for them. we can't forget the decisions people make matter. they can determine whether everyone -- has a fair shake or not. i am grateful to work at the center for american progress, committing to expand the circle so that children today have hope for better circumstances, and a better future than their circumstances. more grateful that we have a president that lives and breathes a commitment to an

america that expands the middle class, gives people a fair shot, and make sure that no matter where you come from, you can make it if you try. i know it sounds corny, but that is what the american dream is about. president obama told the country in his state of the union this year, it is our generation's trueto ignite the engine of america's economic growth -- a rising, thriving middle class. i cannot agree more. been through a lot. i'm grateful we have a president battles,the budget economic growth policies, and even health care -- he has been focused on expanding opportunities for all americans. i think it is in part because he is thinking of the kids that need that fair shot to ensure they reach their potential, because he knows we are all better off when they do. for that, i am very grateful as well.

ladies and gentle men, it is my great, great privilege to introduce to you the president of the united states. chief" playing] [applause] >> thank you. [applause] thank you, everybody. thank you so much. please, please have a seat. thank you so much. well, thank you, neera, for the wonderful introduction and sharing a story that resonated with me. there were a lot of parallels in my life and probably resonated with some of you. over the past 10 years, the center for american progress has done incredible work to shape the debate over expanding opportunity for all americans. and i could not be more grateful to cap not only for giving me a lot of good policy ideas, but also giving me a lot of staff.

[laughter] my friend, john podesta, ran my transition. my chief of staff, denis mcdonough, did a stint at cap. so you guys are obviously doing a good job training folks. i also want to thank all the members of congress and my administration who are here today for the wonderful work that they do. i want to thank mayor gray and everyone here at the arc for having me. this center, which i've been to quite a bit, have had a chance to see some of the great work that's done here. and all the nonprofits that call the arc home offer access to everything from education, to health care, to a safe shelter from the streets, which means that you're harnessing the power of community to expand opportunity for folks here in d.c. and your work reflects a tradition that runs through our

history -- a belief that we're greater together than we are on our own. and that's what i've come here to talk about today. over the last two months, washington has been dominated by some pretty contentious debates i think that's fair to say. and between a reckless shutdown by congressional republicans in an effort to repeal the affordable care act, and admittedly poor execution on my administration's part in implementing the latest stage of the new law, nobody has acquitted themselves very well these past few months. so it's not surprising that the american people's frustrations with washington are at an all- time high. but we know that people's frustrations run deeper than these most recent political battles. their frustration is rooted in their own daily battles -- to make ends meet, to pay for college, buy a home, save for retirement.

it's rooted in the nagging sense that no matter how hard they work, the deck is stacked against them. and it's rooted in the fear that their kids won't be better off than they were. they may not follow the constant back-and-forth in washington or all the policy details, but they experience in a very personal way the relentless, decades-long trend that i want to spend some time talking about today. and that is a dangerous and growing inequality and lack of upward mobility that has jeopardized middle-class america's basic bargain -- that if you work hard, you have a chance to get ahead. i believe this is the defining challenge of our time -- making sure our economy works for every working american.

it's why i ran for president. it was at the center of last year's campaign. it drives everything i do in this office. and i know i've raised this issue before, and some will ask why i raise the issue again right now. i do it because the outcomes of the debates we're having right now -- whether it's health care, or the budget, or reforming our housing and financial systems -- all these things will have real, practical implications for every american. and i am convinced that the decisions we make on these issues over the next few years will determine whether or not our children will grow up in an america where opportunity is real. now, the premise that we're all created equal is the opening line in the american story. and while we don't promise equal outcomes, we have strived to deliver equal opportunity -- the

idea that success doesn't depend on being born into wealth or privilege, it depends on effort and merit. and with every chapter we've added to that story, we've worked hard to put those words into practice. it was abraham lincoln, a self- described "poor man's son," who started a system of land grant colleges all over this country so that any poor man's son could go learn something new. when farms gave way to factories, a rich man's son named teddy roosevelt fought for an eight-hour workday, protections for workers, and busted monopolies that kept prices high and wages low. when millions lived in poverty, fdr fought for social security, and insurance for the unemployed, and a minimum wage. when millions died without health insurance, lbj fought for medicare and medicaid.

together, we forged a new deal, declared a war on poverty in a great society. we built a ladder of opportunity to climb, and stretched out a safety net beneath so that if we fell, it wouldn't be too far, and we could bounce back. and as a result, america built the largest middle class the world has ever known. and for the three decades after world war ii, it was the engine of our prosperity. now, we can't look at the past through rose-colored glasses. the economy didn't always work for everyone. racial discrimination locked millions out of poverty -- or out of opportunity. women were too often confined to a handful of often poorly paid professions. and it was only through painstaking struggle that more women, and minorities, and americans with disabilities began to win the right to more

fairly and fully participate in the economy. nevertheless, during the post- world war ii years, the economic ground felt stable and secure for most americans, and the future looked brighter than the past. and for some, that meant following in your old man's footsteps at the local plant, and you knew that a blue-collar job would let you buy a home, and a car, maybe a vacation once in a while, health care, a reliable pension. for others, it meant going to college -- in some cases, maybe the first in your family to go to college. and it meant graduating without taking on loads of debt, and being able to count on advancement through a vibrant job market. now, it's true that those at the top, even in those years, claimed a much larger share of income than the rest -- the top

10% consistently took home about one-third of our national income. but that kind of inequality took place in a dynamic market economy where everyone's wages and incomes were growing. and because of upward mobility, the guy on the factory floor could picture his kid running the company some day. but starting in the late 1970's, this social compact began to unravel. technology made it easier for companies to do more with less, eliminating certain job occupations. a more competitive world lets companies ship jobs anywhere. and as good manufacturing jobs automated or headed offshore, workers lost their leverage, jobs paid less and offered fewer benefits.

as values of community broke down, and competitive pressure increased, businesses lobbied washington to weaken unions and the value of the minimum wage. as a trickle-down ideology became more prominent, taxes were slashed for the wealthiest, while investments in things that make us all richer, like schools and infrastructure, were allowed to wither. and for a certain period of time, we could ignore this weakening economic foundation, in part because more families were relying on two earners as women entered the workforce. we took on more debt financed by a juiced-up housing market. but when the music stopped, and the crisis hit, millions of families were stripped of whatever cushion they had left. and the result is an economy that's become profoundly

unequal, and families that are more insecure. i'll just give you a few statistics. since 1979, when i graduated from high school, our productivity is up by more than 90%, but the income of the typical family has increased by less than 8%. since 1979, our economy has more than doubled in size, but most of that growth has flowed to a fortunate few. the top 10% no longer takes in one-third of our income -- it now takes half. whereas in the past, the average ceo made about 20 to 30 times the income of the average worker, today's ceo now makes 273 times more. and meanwhile, a family in the top 1% has a net worth 288 times higher than the typical family,

which is a record for this country. so the basic bargain at the heart of our economy has frayed. in fact, this trend towards growing inequality is not unique to america's market economy. across the developed world, inequality has increased. some of you may have seen just last week, the pope himself spoke about this at eloquent length. "how can it be," he wrote, "that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?" but this increasing inequality is most pronounced in our country, and it challenges the very essence of who we are as a people. understand we've never begrudged success in america. we aspire to it.

we admire folks who start new businesses, create jobs, and invent the products that enrich our lives. and we expect them to be rewarded handsomely for it. in fact, we've often accepted more income inequality than many other nations for one big reason because we were convinced that america is a place where even if you're born with nothing, with a little hard work you can improve your own situation over time and build something better to leave your kids. as lincoln once said, "while we do not propose any war upon capital, we do wish to allow the humblest man an equal chance to get rich with everybody else." the problem is that alongside increased inequality, we've seen diminished levels of upward mobility in recent years. a child born in the top 20% has about a 2-in-3 chance of staying

at or near the top. a child born into the bottom 20% has a less than 1-in-20 shot at making it to the top. he's 10 times likelier to stay where he is. in fact, statistics show not only that our levels of income inequality rank near countries like jamaica and argentina, but that it is harder today for a child born here in america to improve her station in life than it is for children in most of our wealthy allies -- countries like canada or germany or france. they have greater mobility than we do, not less. the idea that so many children are born into poverty in the wealthiest nation on earth is heartbreaking enough. but the idea that a child may never be able to escape that poverty because she lacks a decent education or health care, or a community that views her

future as their own, that should offend all of us and it should compel us to action. we are a better country than this. so let me repeat -- the combined trends of increased inequality and decreasing mobility pose a fundamental threat to the american dream, our way of life, and what we stand for around the globe. and it is not simply a moral claim that i'm making here. there are practical consequences to rising inequality and reduced mobility. for one thing, these trends are bad for our economy. one study finds that growth is more fragile and recessions are more frequent in countries with greater inequality. and that makes sense. when families have less to spend, that means businesses have fewer customers, and households rack up greater mortgage and credit card debt.

meanwhile, concentrated wealth at the top is less likely to result in the kind of broadly based consumer spending that drives our economy, and together with lax regulation, may contribute to risky speculative bubbles. and rising inequality and declining mobility are also bad for our families and social cohesion -- not just because we tend to trust our institutions less, but studies show we actually tend to trust each other less when there's greater inequality. and greater inequality is associated with less mobility between generations. that means it's not just temporary. the effects last. it creates a vicious cycle. for example, by the time she turns three years old, a child born into a low-income home hears 30 million fewer words than a child from a well-off family, which means by the time

she starts school she's already behind, and that deficit can compound itself over time. and finally, rising inequality and declining mobility are bad for our democracy. ordinary folks can't write massive campaign checks or hire high- priced lobbyists and lawyers to secure policies that tilt the playing field in their favor at everyone else's expense. and so people get the bad taste that the system is rigged, and that increases cynicism and polarization, and it decreases the political participation that is a requisite part of our system of self-government. so this is an issue that we have to tackle head on. and if, in fact, the majority of americans agree that our number- one priority is to restore opportunity and broad-based

growth for all americans, the question is, why has washington consistently failed to act? and i think a big reason is the myths that have developed around the issue of inequality. first, there is the myth that this is a problem restricted to a small share of predominantly minority poor -- that this isn't a broad-based problem, this is a black problem or a hispanic problem or a native american problem. now, it's true that the painful legacy of discrimination means that african americans, latinos, native americans are far more likely to suffer from a lack of opportunity -- higher unemployment, higher poverty rates. it's also true that women still make $0.77 on the dollar compared to men. so we're going to need strong

application of antidiscrimination laws. we're going to need immigration reform that grows the economy and takes people out of the shadows. we're going to need targeted initiatives to close those gaps. [applause] but here's an important point. the decades-long shifts in the economy have hurt all groups -- poor and middle class, inner city and rural folks, men and women, and americans of all races. and as a consequence, some of the social patterns that contribute to declining mobility that were once attributed to the urban poor -- that's a particular problem for the inner city -- single-parent households or drug abuse -- it turns out now we're seeing that pop up everywhere.

a new study shows that disparities in education, mental health, obesity, absent fathers, isolation from church, isolation from community groups -- these gaps are now as much about growing up rich or poor as they are about anything else. the gap in test scores between poor kids and wealthy kids is now nearly twice what it is between white kids and black kids. kids with working-class parents are 10 times likelier than kids with middle- or upper-class parents to go through a time when their parents have no income. so the fact is this -- the opportunity gap in america is now as much about class as it is about race, and that gap is growing. so if we're going to take on growing inequality and try to improve upward mobility for all people, we've got to move beyond

the false notion that this is an issue exclusively of minority concern. and we have to reject a politics that suggests any effort to address it in a meaningful way somehow pits the interests of a deserving middle class against those of an undeserving poor in search of handouts. [applause] second, we need to dispel the myth that the goals of growing the economy and reducing inequality are necessarily in conflict, when they should actually work in concert. we know from our history that our economy grows best from the middle out, when growth is more widely shared. and we know that beyond a certain level of inequality, growth actually slows altogether. third, we need to set aside the

belief that government cannot do anything about reducing inequality. it's true that government cannot prevent all the downsides of the technological change and global competition that are out there right now, and some of those forces are also some of the things that are helping us grow. and it's also true that some programs in the past, like welfare before it was reformed, were sometimes poorly designed, created disincentives to work. but we've also seen how government action time and again can make an enormous difference in increasing opportunity and bolstering ladders into the middle class. investments in education, laws establishing collective bargaining, and a minimum wage these all contributed to rising standards of living for massive numbers of americans. [applause] likewise, when previous generations declared that every citizen of this country deserved a basic measure of security -- a

floor through which they could not fall -- we helped millions of americans live in dignity, and gave millions more the confidence to aspire to something better, by taking a risk on a great idea. without social security, nearly half of seniors would be living in poverty -- half. today, fewer than 1 in 10 do. before medicare, only half of all seniors had some form of health insurance. today, virtually all do. and because we've strengthened that safety net, and expanded pro-work and pro-family tax credits like the earned income tax credit, a recent study found that the poverty rate has fallen by 40% since the 1960s. and these endeavors didn't just make us a better country. they reaffirmed that we are a great country.

so we can make a difference on this. in fact, that's our generation's task -- to rebuild america's economic and civic foundation to continue the expansion of opportunity for this generation and the next generation. [applause] and like neera, i take this personally. i'm only here because this country educated my grandfather on the gi bill. when my father left and my mom hit hard times trying to raise my sister and me while she was going to school, this country helped make sure we didn't go hungry. when michelle, the daughter of a shift worker at a water plant and a secretary, wanted to go to college, just like me, this country helped us afford it until we could pay it back. so what drives me as a grandson, a son, a father -- as an

american -- is to make sure that every striving, hardworking, optimistic kid in america has the same incredible chance that this country gave me. [applause] it has been the driving force between everything we've done these past five years. and over the course of the next year, and for the rest of my presidency, that's where you should expect my administration to focus all our efforts. [applause] now, you'll be pleased to know this is not a state of the union address. [laughter] and many of the ideas that can make the biggest difference in expanding opportunity i've presented before. but let me offer a few key

principles, just a roadmap that i believe should guide us in both our legislative agenda and our administrative efforts. to begin with, we have to continue to relentlessly push a growth agenda. it may be true that in today's economy, growth alone does not guarantee higher wages and incomes. we've seen that. but what's also true is we can't tackle inequality if the economic pie is shrinking or stagnant. the fact is if you're a progressive and you want to help the middle class and the working poor, you've still got to be concerned about competitiveness and productivity and business confidence that spurs private sector investment. and that's why from day one we've worked to get the economy growing and help our businesses hire. and thanks to their resilience and innovation, they've created nearly 8 million new jobs over the past 44 months. and now we've got to grow the economy even faster. and we've got to keep working to make america a magnet for good, middle-class jobs to replace the

ones that we've lost in recent decades -- jobs in manufacturing and energy and infrastructure and technology. and that means simplifying our corporate tax code in a way that closes wasteful loopholes and ends incentives to ship jobs overseas. [applause] and by broadening the base, we can actually lower rates to encourage more companies to hire here and use some of the money we save to create good jobs rebuilding our roads and our bridges and our airports, and all the infrastructure our businesses need. it means a trade agenda that grows exports and works for the middle class. it means streamlining regulations that are outdated or unnecessary or too costly. and it means coming together around a responsible budget -- one that grows our economy faster right now and shrinks our long-term deficits, one that unwinds the harmful sequester cuts that haven't made a lot of sense - [applause]

-- and then frees up resources to invest in things like the scientific research that's always unleashed new innovation and new industries. when it comes to our budget, we should not be stuck in a stale debate from two years ago or three years ago. a relentlessly growing deficit of opportunity is a bigger threat to our future than our rapidly shrinking fiscal deficit. [applause] so that's step one towards restoring mobility, making sure our economy is growing faster. step two is making sure we empower more americans with the skills and education they need to compete in a highly competitive global economy. we know that education is the most important predictor of income today, so we launched a

race to the top in our schools. we're supporting states that have raised standards for teaching and learning. we're pushing for redesigned high schools that graduate more kids with the technical training and apprenticeships, and in-demand, high-tech skills that can lead directly to a good job and a middle-class life. we know it's harder to find a job today without some higher education, so we've helped more students go to college with grants and loans that go farther than before. we've made it more practical to repay those loans. and today, more students are graduating from college than ever before. we're also pursuing an aggressive strategy to promote innovation that reins in tuition costs. we've got lower costs so that young people are not burdened by enormous debt when they make the right decision to get higher education. and next week, michelle and i will bring together college presidents and non-profits to lead a campaign to help more low-income students attend and succeed in college.

[applause] but while higher education may be the surest path to the middle class, it's not the only one. so we should offer our people the best technical education in the world. that's why we've worked to connect local businesses with community colleges, so that workers young and old can earn the new skills that earn them more money. and i've also embraced an idea that i know all of you at the center for american progress have championed -- and, by the way, republican governors in a couple of states have championed and that's making high-quality preschool available to every child in america. [applause] we know that kids in these programs grow up likelier to get more education, earn higher wages, form more stable families

of their own. it starts a virtuous cycle, not a vicious one. and we should invest in that. we should give all of our children that chance. and as we empower our young people for future success, the third part of this middle-class economics is empowering our workers. it's time to ensure our collective bargaining laws function as they're supposed to [applause] -- so unions have a level playing field to organize for a better deal for workers and better wages for the middle class. it's time to pass the paycheck fairness act so that women will have more tools to fight pay discrimination. [applause] it's time to pass the employment non-discrimination act so workers can't be fired for who they are or who they love. [applause]

and even though we're bringing manufacturing jobs back to america, we're creating more good-paying jobs in education and health care and business services. we know that we're going to have a greater and greater portion of our people in the service sector. and we know that there are airport workers, and fast-food workers, and nurse assistants, and retail salespeople who work their tails off and are still living at or barely above poverty. [applause] and that's why it's well past the time to raise a minimum wage that in real terms right now is below where it was when harry truman was in office. [applause] this shouldn't be an ideological question.

it was adam smith, the father of free-market economics, who once said, "they who feed, clothe, and lodge the whole body of the people should have such a share of the produce of their own labor as to be themselves tolerably well fed, clothed, and lodged." and for those of you who don't speak old-english -- [laughter] -- let me translate. it means if you work hard, you should make a decent living. [applause] if you work hard, you should be able to support a family. now, we all know the arguments that have been used against a higher minimum wage. some say it actually hurts low- wage workers -- businesses will be less likely to hire them. but there's no solid evidence that a higher minimum wage costs jobs, and research shows it raises incomes for low-wage

workers and boosts short-term economic growth. [applause] others argue that if we raise the minimum wage, companies will just pass those costs on to consumers. but a growing chorus of businesses, small and large, argue differently. and already, there are extraordinary companies in america that provide decent wages, salaries, and benefits, and training for their workers, and deliver a great product to consumers. sas in north carolina offers childcare and sick leave. rei, a company my secretary of the interior used to run, offers retirement plans and strives to cultivate a good work balance. there are companies out there that do right by their workers. they recognize that paying a decent wage actually helps their bottom line, reduces turnover. it means workers have more money to spend, to save, maybe eventually start a business of

their own. a broad majority of americans agree we should raise the minimum wage. that's why, last month, voters in new jersey decided to become the 20th state to raise theirs even higher. that's why, yesterday, the d.c. council voted to do it, too. i agree with those voters. [applause] i agree with those voters, and i'm going to keep pushing until we get a higher minimum wage for hard-working americans across the entire country. it will be good for our economy. it will be good for our families. [applause] number four, as i alluded to earlier, we still need targeted programs for the communities and workers that have been hit hardest by economic change and the great recession. these communities are no longer limited to the inner city. they're found in neighborhoods hammered by the housing crisis,

manufacturing towns hit hard by years of plants packing up, landlocked rural areas where young folks oftentimes feel like they've got to leave just to find a job. there are communities that just aren't generating enough jobs anymore. so we've put forward new plans to help these communities and their residents, because we've watched cities like pittsburgh or my hometown of chicago revamp themselves. and if we give more cities the tools to do it -- not handouts, but a hand up -- cities like detroit can do it, too. so in a few weeks, we'll announce the first of these promise zones, urban and rural communities where we're going to support local efforts focused on a national goal -- and that is a child's course in life should not be determined by the zip code he's born in, but by the strength of his work ethic and the scope of his dreams. [applause]

and we're also going to have to do more for the long-term unemployed. for people who have been out of work for more than six months, often through no fault of their own, life is a catch-22. companies won't give their résume an honest look because they've been laid off so long -- but they've been laid off so long because companies won't give their résume an honest look. [laughter] and that's why earlier this year, i challenged ceos from some of america's best companies to give these americans a fair shot. and next month, many of them will join us at the white house for an announcement about this. fifth, we've got to revamp retirement to protect americans in their golden years, to make sure another housing collapse doesn't steal the savings in their homes. we've also got to strengthen our safety net for a new age, so it doesn't just protect people who hit a run of bad luck from falling into poverty, but also propels them back out of poverty. today, nearly half of full-time

workers and 80% of part-time workers don't have a pension or retirement account at their job. about half of all households don't have any retirement savings. so we're going to have to do more to encourage private savings and shore up the promise of social security for future generations. and remember, these are promises we make to one another. we don't do it to replace the free market, but we do it to reduce risk in our society by giving people the ability to take a chance and catch them if they fall. one study shows that more than half of americans will experience poverty at some point during their adult lives. think about that. this is not an isolated situation. more than half of americans at some point in their lives will experience poverty. that's why we have nutrition assistance or the program known as snap, because it makes a difference for a mother who's

working, but is just having a hard time putting food on the table for her kids. that's why we have unemployment insurance, because it makes a difference for a father who lost his job and is out there looking for a new one that he can keep a roof over his kids' heads. by the way, christmastime is no time for congress to tell more than 1 million of these americans that they have lost their unemployment insurance, which is what will happen if congress does not act before they leave on their holiday vacation. [applause] the point is these programs are not typically hammocks for people to just lie back and relax. these programs are almost always temporary means for hardworking people to stay afloat while they try to find a new job or go into school to retrain themselves for the jobs that are out there, or sometimes just to cope with a bout of bad luck. progressives

should be open to reforms that actually strengthen these programs and make them more responsive to a 21st century economy. for example, we should be willing to look at fresh ideas to revamp unemployment and disability programs to encourage faster and higher rates of re- employment without cutting benefits. we shouldn't weaken fundamental protections built over generations, because given the constant churn in today's economy and the disabilities that many of our friends and neighbors live with, they're needed more than ever. we should strengthen them and adapt them to new circumstances so they work even better. but understand that these programs of social insurance benefit all of us, because we don't know when we might have a run of bad luck. [applause] we don't know when we might lose a job. of course, for decades,

there was one yawning gap in the safety net that did more than anything else to expose working families to the insecurities of today's economy -- namely, our broken health care system. that's why we fought for the affordable care act -- [applause] -- because 14,000 americans lost their health insurance every single day, and even more died each year because they didn't have health insurance at all. we did it because millions of families who thought they had coverage were driven into bankruptcy by out-of-pocket costs that they didn't realize would be there. tens of millions of our fellow citizens couldn't get any coverage at all. and dr. king once said, "of all the forms of inequality, injustice in health care is the most shocking and inhumane."

well, not anymore. [applause] because in the three years since we passed this law, the share of americans with insurance is up, the growth of health care costs are down to their slowest rate in 50 years. more people have insurance, and more have new benefits and protections -- 100 million americans who have gained the right for free preventive care like mammograms and contraception,the more than 7 million americans who have saved an average of $1,200 on their prescription medicine, every american who won't go broke when they get sick because their insurance can't limit their care anymore. more people without insurance have gained insurance -- more than 3 million young americans who have been able to stay on their parents' plan, the more than half a million americans and counting who are poised to get covered starting on january 1st, some for the very first time.

and it is these numbers -- not the ones in any poll -- that will ultimately determine the fate of this law. [applause] it's the measurable outcomes in reduced bankruptcies and reduced hours that have been lost because somebody couldn't make it to work, and healthier kids with better performance in schools, and young entrepreneurs who have the freedom to go out there and try a new idea -- those are the things that will ultimately reduce a major source of inequality and help ensure more americans get the start that they need to succeed in the future. i have acknowledged more than once that we didn't roll out parts of this law as well as we should have. but the law is already working in major ways that benefit millions of americans right now, even as we've begun to slow the rise in health care costs, which is good for family budgets, good for federal and state budgets, and good for the budgets of business